The Experts

Failure to haggle explains why Aussies end up poor!

If you end up less rich than you’d like when you stop working, or you always resent the car you drive and the ones others get around in, or you’d prefer to be in Tuscany rather than Terrigal, Tugan or Tuncurry for your holidays, then maybe you should look at yourself and your refusal to haggle.

(By the way, I like the three-T towns but they are cheaper than Tuscany and all start with “T”!)

A lot of people have disdain for some cultural groups who’ve been brought up to haggle on price or to ask for a discount for using cash but that’s because they understand business or often have being raised in a family background in business.

In one of Woody Allen’s old films he told us “the greatest crime in our family was buying retail!” However, too many young and older people don’t have the guts to ask for discounts, though I have seen Aussies do it in markets in Istanbul, Vietnam and Shanghai. Of course, their fellow and more seasoned travellers always advise that merchants expect you to haggle and were pretty good at it.

I recall in Ho Chi Min City, numerous young sellers at markets would repeatedly say, as Maureen started her bid price at half their offer price, “you’re killing me!” However, in many cases she got what she wanted and the sellers made money.

I get so irritated when I read bleeding heart stories in the media about household debt stress, with interest rates at record lows and no likely rises for over a year or maybe two. People with sane minds have borrowed and possibly paid too much so they have to cope like Aussies did in the old days. They got second jobs, they started part-time businesses at nights or on the weekends, they gave up drinking or smoking, took in lodgers, studied at night to get a promotion and some did a budget on their income and spending and found money inside their life!

I’ve talked about doing a budget before and then GST’ing your life, that is, put a 10% tax on yourself and your spending. So if you spend $50,000 a year as a household, you aim to save $5,000.

People have told me this is possible for food, entertainment, clothes, etc but not for rent and other big payments but I disagree.

If you’re in debt stress and renting, then move to a cheaper suburb. And when it comes to home loan repayments, get real, get investigative and get some big savings.

And please don’t call me a complacent critic who doesn’t know what it’s like to struggle, as we brought up two kids on a teacher’s salary when home loan interest rates started at 13% and peaked at 18%. Sure, house prices were lower but so were wages and inflation averaged around 8%, meaning the cost of living rose by 8% a year!

Yep, I had a second job and studied at nights, so did my wife. And yep, we started a part-time business, which morphed into the Switzer Group today that employs over 50 people but that’s by the way.

This isn’t just my rant but was started by the Australian Competition and Consumer Commission report that said we don’t try to get the best loan from our lenders and this explains a large chunk of bank profits. But it’s not only lining banks’ coffers, it apparently is stressing us out. This is what the AFR’s Su-Lin Tan told us four months ago: “The number of households at all levels of stress rose by 6,000 in August to reach a total of 996,000 stressed households, according to DFA's analysis, using 52,000 household surveys, public data from the Reserve Bank, APRA and ABS, as well as private data from lenders and mortgage aggregators.

“The majority of households (just under 80% of all households) are mildly stressed, although the biggest group of severely stressed mortgage holders are exclusive professionals and mature stable families”, DFA says.

This is after a 0.14% rate rise on loan rates of interest, which are historically low. So you have to ask: why wouldn’t someone think about comparing their rates of interest? I bet most people reading this don’t know precisely what rate they’re paying and what the alternative low rates out there are.

I know Switzer Home Loan rates are 3.89% (that’s both the advertised and comparison rate) but I know there are lower advertised rates out there because I look! I care what we pay! I also know if I walk into my bank and ask for a loan and I pass the tougher tests for a loan, I’ll end up on a rate with a 4% handle rather than a 3% one.

I’d like everyone to use Switzer Home Loans because they’re a good low rate. That’s because I’m in business but if someone can get a better rate and better conditions with the loan, that’s great. I throw my lower-than-average rate around to provoke someone to actually check what they’re paying and I explain how you should ask about the comparison rate of interest that adds in the fees you pay. It can be a more realistic take on what rate you’re actually paying.

Going to ratecity.com.au, I found one low advertised rate of 3.64% but the comparison rate was 4.03%, so it pays to ask for the real rate you’ll pay. And if you don’t feel that you can haggle with a bank, then get someone trained to negotiate with lenders (e.g. a mortgage broker) and let him or her try and save you a load of money to KO your stress. These people love to try and refinance you into a lower rate loan than you’ve currently got because they get the upfront payment and then trail from getting you as a new borrower for the lender.

Despite that, the ACCC said “In the year to June 30, 2018 less than 4 per cent of variable rate residential mortgages and just over 2 per cent of fixed rate residential mortgages with the big four (main brands) and Macquarie refinanced to another lender.” (SMH)

Banks will give customers discounts but you have to ask for them. If you’re paying more than you should, threaten to leave if they don’t lower your rate. Then go to a couple of mortgage brokers and see what they can do for you.

As I always argue: “Anything worth doing is worth doing for money.”

“The discretionary discounts that banks offer borrowers are opaque and the process borrowers are required to go through to discover price offers unnecessarily inflates the costs of searching for better offers,” the ACCC explains..

Looking at the ACCC report and writing in Fairfax newspapers, Elizabeth Knight found the reason why a lot of people don’t switch: “The survey found that nearly one-third of current borrowers surveyed said they would not consider switching unless they were offered an interest rate at least 60 basis points lower than their current one. Another third of borrowers surveyed said they would switch for an interest rate between one basis point and 59 basis points lower than their current one. The remaining borrowers surveyed said they would not switch based purely on interest rates.”

Unfortunately, many Aussies, who’ll end up poorer or less rich than they want to be, don’t care enough about their money. They find it boring. Yet money gives exciting holidays, houses, cars and the peace of mind security many of us dream for ourselves and our loved ones.

I know some people get lucky being born into wealthy families but most don’t and successful people work hard, give up stuff, try to learn from successful people and have a goal to get better. But over the years, the standout characteristic of these fabulously successful people is that they were willing to get outside their comfort zone.

Jim Rohn, the US business and motivational speaker, who Anthony Robbins worked for as young man, told us that just about everything you want “is just outside your comfort zone.”

Change you and you will change your life, your happiness, others you care about and their happiness. And I reckon you’ll also get wealthier.

But if nothing changes, nothing changes and that includes the whinging from people who won’t beat their fears and change. (If you know someone in this group, maybe you should send this little story to them.)

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